Citic Resources looks to New Zealand project
Citic Resources Holdings, the energy and metals arm of state-backed conglomerate Citic Group, is considering funding a coking coal project in New Zealand and is looking for a mainland buyer for the project's output.
The company signed a preliminary agreement in May to take 30 per cent of the output of the Bathurst Resources' Buller coal project on New Zealand's South Island for five years.
Citic Resources would provide up to US$40 million in funding for the project, which has 47.1 million tonnes of coking coal reserves. Coking coal is used in steel smelting.
Citic Resources is a sister company of Citic Pacific, a Hong Kong-listed steel-to-property conglomerate that is one of mainland's largest speciality steel producers. It is also a developer of a major iron ore project in Western Australia.
'We are still doing due diligence on the New Zealand project,' said Citic Resources chief executive Zeng Chen.
'We must first find a mainland coal user that is interested in buying Buller's coal to blend with that of its other suppliers, so the progress is relatively slow.'
Zeng was speaking a day after Citic Resources posted a 134.8 per cent annual rise in net profits to HK$393.4 million for the year's first half.
The increase was mostly driven by a HK$273.2 million gain from the company's sale of part of its stake in a coal project in Queensland, Australia.
Excluding the gain, operating profit from its coal business rose 16.6 per cent to HK$155.6 million, while Citic Resources' pre-tax profit grew 19.5 per cent to HK$440.37 million.
Crude oil production saw operating profit rise 61.4 per cent to HK$467.2 million yuan, on the back of a 6 per cent rise in output of its mainstay Karazhanbas oilfield in Kazakhstan. The field yielded an average selling price of US$96 a barrel, up 37 per cent.
Commodities trading saw operating profit fall 41 per cent to HK$123.6 million, despite a 42 per cent rise in revenue.
Zeng said profit margins were squeezed by a 15 per cent appreciation of the Australian dollar against the greenback and a change in Australia's iron ore pricing system to shorter-term movements.